tIRA withdrawal question

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Oak&Elm
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tIRA withdrawal question

Post by Oak&Elm » Sat Jan 26, 2019 7:29 pm

Please bear with me I know this is a dumb question. When in retirement and you want to take funds from a tIRA is it a simple as sell a portion of an investment, wait for it to settle and then transfer it to your personal linked checking/ savings account? Is there a prompt to have federal and state taxes withheld? I’m with Vanguard. I’m actually asking for a friend who just retired and if it’s this easy I think he could handle it even though he’s very computer illiterate.

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Re: tIRA withdrawal question

Post by retiredjg » Sat Jan 26, 2019 7:36 pm

On the old style non-brokerage platform, when you sell something in a traditional IRA, the website gives you a chance to withhold any percentage you want for federal and for state taxes. The rest shows up in your checking account a couple of days later.

I do not know, but I imagine the brokerage platform is very similar.

But if he is that computer illiterate, maybe he should do this the old fashioned way - by phone and fax perhaps?

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Re: tIRA withdrawal question

Post by Oak&Elm » Sat Jan 26, 2019 7:42 pm

Well actually if he could just call Vanguard and say sell some of fund X and send me a check that would work even better, even if he gets charged for a broker assisted trade if he can limit it to once or twice a year that expense would be minimal

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Re: tIRA withdrawal question

Post by Alan S. » Sat Jan 26, 2019 7:55 pm

If he does nothing about the tax withholding, then 10% will be withheld. If he does not want any withholding he must specifically decline withholding. The larger the distribution amount, the more likely he should not decline withholding and withhold at a higher rate than 10%.

Of course, ordinary income taxes will be owed plus a 10% penalty if he is not yet 59.5. If he is an early retiree well before 59.5 and will need to take continuing IRA distributions, he might consider a 72t plan to eliminate the 10% penalty.

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Re: tIRA withdrawal question

Post by oldcomputerguy » Sat Jan 26, 2019 7:58 pm

My traditional IRA is at Fidelity. If I need to draw from it, it's a two-step process. First I sell enough of one (or more) fund(s) to meet the dollar requirement. Then, once the funds settle, I transfer them to my checking account. Fidelity won't let me move the money until the sale settles and the cash is in my settlement fund. (Fidelity does provide the option to withhold a certain percentage for taxes.)
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: tIRA withdrawal question

Post by Oak&Elm » Sat Jan 26, 2019 8:14 pm

So as for the withdrawal that’s all you need to do, sell it, let the funds settle, identify how much in taxes to withhold and than transfer to your checking/savings account ?

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Re: tIRA withdrawal question

Post by oldcomputerguy » Sat Jan 26, 2019 9:12 pm

Oak&Elm wrote:
Sat Jan 26, 2019 8:14 pm
So as for the withdrawal that’s all you need to do, sell it, let the funds settle, identify how much in taxes to withhold and than transfer to your checking/savings account ?
That's it. It's actually pretty simple.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: tIRA withdrawal question

Post by GerryL » Sat Jan 26, 2019 9:36 pm

oldcomputerguy wrote:
Sat Jan 26, 2019 9:12 pm
Oak&Elm wrote:
Sat Jan 26, 2019 8:14 pm
So as for the withdrawal that’s all you need to do, sell it, let the funds settle, identify how much in taxes to withhold and than transfer to your checking/savings account ?
That's it. It's actually pretty simple.
I'll be doing my first RMD this year (starting with a QCD soon after I hit the 70.5 year mark). Since the settlement fund is in the IRA, you haven't really taken the RMD until you move the money out, right? I'm asking because I might want to sell the post-QCD portion of the RMD and then move it out in a few clumps. Sounds like this should be fairly simple.

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Re: tIRA withdrawal question

Post by Epsilon Delta » Sun Jan 27, 2019 12:50 am

If this is a traditional mutual fund account, which it may well be for an older non-tech savvy user, there is no settlement delay or fees for selling the mutual funds. The default is to mail you a check that night. You could also deposit the withdrawal in a taxable fund such as a MM fund if you have one or want to open one.

Call Vanguard and tell them you want to make an IRA withdrawal and they will ask about withholding etc. It helps to have some idea of what they will so you can answer the questions, but the folks I've talked to are patient.

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Re: tIRA withdrawal question

Post by oldcomputerguy » Sun Jan 27, 2019 6:33 am

GerryL wrote:
Sat Jan 26, 2019 9:36 pm
oldcomputerguy wrote:
Sat Jan 26, 2019 9:12 pm
Oak&Elm wrote:
Sat Jan 26, 2019 8:14 pm
So as for the withdrawal that’s all you need to do, sell it, let the funds settle, identify how much in taxes to withhold and than transfer to your checking/savings account ?
That's it. It's actually pretty simple.
I'll be doing my first RMD this year (starting with a QCD soon after I hit the 70.5 year mark). Since the settlement fund is in the IRA, you haven't really taken the RMD until you move the money out, right? I'm asking because I might want to sell the post-QCD portion of the RMD and then move it out in a few clumps. Sounds like this should be fairly simple.
Yes, the money does not count as "distributed" until it actually leaves the IRA. If the settlement account is within the IRA, and the money is in the settlement account, it still counts as being in the IRA and has not yet been "distributed".
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: tIRA withdrawal question

Post by Oak&Elm » Sun Jan 27, 2019 7:23 am

Hey, just wanted to say thanks for the helpful responses. I have a friend who just retired and I just want to help him help himself. Even though he’s a dinosaur with computers I think he can handle this. I think diy is less complicated than working with an advisor anyhow IMO and obviously saves you a few bucks along the way.

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Re: tIRA withdrawal question

Post by retiredjg » Sun Jan 27, 2019 7:53 am

Epsilon Delta wrote:
Sun Jan 27, 2019 12:50 am
If this is a traditional mutual fund account, which it may well be for an older non-tech savvy user, there is no settlement delay or fees for selling the mutual funds.
Please educate me. How long is this "settlement delay"? And what's this about a fee to sell the mutual funds?

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Re: tIRA withdrawal question

Post by Oak&Elm » Sun Jan 27, 2019 8:38 am

Most brokerages have a 1-3 day settlement delay between the time you sell your funds and they are available for withdrawal. The transaction fee I was referring to was for folks who have the broker execute their trade, if you are a diy there is no fee unless the brokerages don’t directly sell that fund, like selling a Vanguard held fund though Fidelity.

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Re: tIRA withdrawal question

Post by retiredjg » Sun Jan 27, 2019 9:14 am

Oak&Elm wrote:
Sun Jan 27, 2019 8:38 am
Most brokerages have a 1-3 day settlement delay between the time you sell your funds and they are available for withdrawal.
I didn't know about this delay. One more reason I'm glad to still be on the old platform at Vanguard. I do one transaction and the money is in my checking account in 2 to 3 business days.

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Re: tIRA withdrawal question

Post by Oak&Elm » Sun Jan 27, 2019 10:41 am

Not sure how the old Vanguard platform works but my guess is the fund settlement delay is figured in somehow,like they say I don’t care how you make the sausage just get it done.

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Re: tIRA withdrawal question

Post by sport » Sun Jan 27, 2019 11:33 am

Oak&Elm wrote:
Sun Jan 27, 2019 10:41 am
Not sure how the old Vanguard platform works but my guess is the fund settlement delay is figured in somehow,like they say I don’t care how you make the sausage just get it done.
On the old platform, there is no settlement fund. I can transfer money directly from any fund in my IRA to any fund in my taxable account. If I place the order before 4:00 PM on Monday, the money is in my taxable account on Tuesday.

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